‘Made in India’ no longer sounds good

In the past few days, one of India’s top pharmaceutical companies had its last remaining recognised plant de-recognised by the US Federal Drug Administration (FDA); the US Federal Aviation Administration downgraded India’s aviation regulator leading to negative financial consequences for two of India’s leading airlines; and an independent testing agency in Europe said that India’s top-selling small cars don’t meet international safety standards.

Is this a global conspiracy against India’s success? Or just another sign of India’s chronic governance deficit?

And what do we need to do about these thematically consistent yet seemingly unconnected events?

I am writing this from the aisle seat of an Indian domestic flight. Parked next to me is a cart which says “should not be left unattended when removed from its stowage”, but no cabin crew is in sight.

Just as we were taking off, the mobile phone of a passenger across the aisle rang; the same passenger had pretended to switch off his phone just a couple of minutes earlier when the cabin crew came by. When a major fire broke out at Bangalore’s Carlton Towers, a prominent office block, a few years ago, it was found that many of the emergency exit staircases had been obstructed, some by permanent constructions.

It’s not unusual to find pipes protruding several feet from trucks, motorcycles riding on sidewalks, and traffic going the wrong way on divided highways. This list could go on and on…

Selective safety As a society, it’s apparent that we just don’t have a serious safety (or, for that matter, quality) culture. And this contrasts sharply with the developed world. Indian companies that were at the vanguard of globalisation realised quickly that they would need to address this issue. What resulted were islands of safety (and quality) like the campuses of our leading IT companies and the export plants of some of our leading pharmaceutical companies.

But regulators in the West are becoming more demanding and beginning to question our schizophrenic approach to quality and safety.

The unit head of a leading Indian pharmaceutical company (not the one that’s in big trouble!) told me that in their most recent audit the FDA inspector asked him: “How can I believe your safety systems when everyone on the road outside your plant blatantly ignores all traffic rules and shows scant regard for road safety?”

Some argue that this is a new form of protectionism, a way for the developed world to get back at us for our recent economic success. Others point to how the developed world has priced itself out of the market by putting in place overly exacting standards and guidelines and we should be careful not to emulate them.

A step too far? There is some truth that the West may have gone too far — I once read about a cathedral in the UK which couldn’t have a bulb replaced because safety rules and union practices made it too expensive to do so!

One of my gurus, a key evangelist of grassroot and frugal innovation, Anil Gupta has in recent years been advocating “good enough” solutions even in sensitive areas such as healthcare in order to make it affordable to the masses. Should we be willing to consider such options?

There is some evidence that unreasonable standards have delayed innovation in important areas such as financial inclusion — the low cost Vortex automated teller machine (ATM) faced an uphill struggle to get acceptance in the banking system.

Who is right? And what should we do?

The origin of disadvantage Several international business scholars, including my friend and colleague J Ramachandran, have written about the liability of origin — the disadvantage that companies face because of the geography they come from.

With the success of some of our large firms and high growth over the last two decades, we assumed that such liabilities of origin had ceased to affect us. But it is now clear that such celebration was premature.

How we are perceived affects foreign firms as well. Many years ago, the then CEO of Philips India told me in an interview that a multinational subsidiary’s influence depended on the credibility of its geography.

Today, India’s credibility is in question because of rampant corruption, our inability to ensure that women are safe, and our lack of sensitivity to safety in general. This has a negative impact on multinational companies seeking resources from their parents to expand in India. Safety and quality are still in the ‘ISO mode’ with specifications and processes defined in theory, but not absorbed and internalised in practice.

Global regulators are clearly unwilling to accept this approach any more. Whether they are motivated by genuine concerns, or this is a form of neo-protectionism, there is no option but to change.

One standard If we are serious about continuing to be a global player, we need to put a much higher value on human life than we do at present. The earlier assumption that we could have two different sets of standards — one for the domestic market and the other for exports — is no longer seem tenable.

Low-cost solutions are fine, but the lower cost must come from genuine and sustainable innovation, not from cutting corners or compromising on quality.

Organisations such as Aravind Eye Care System and Narayana Hrudayalaya have shown that it is possible to achieve significant reductions in cost and yet maintain the safety and quality standards of the best hospitals in the world. They should be our role models.

Though improvement in regulation is important, this won’t work in isolation. It has to be part of an overall effort to establish the rule of law in all aspects of society.

This may seem far-fetched, but I would start with reform of the police and lower judiciary. For, unless we establish the basic notion that everyone is subject to the law and all violators will be prosecuted, an elaborate system of high-level regulation simply won’t work.

(The writer is a professor of Strategic Management and the Director, IIM Indore. The views are personal)

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